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FAQ

What's the best way to educate myself on taxes?
Attempt to fill out your own taxes using the IRS instructions provided. The more you make, the more you'll learn, as incomes over $125K are subject to the Alternative Minimum tax. You would discover that there's more than one way to raise the tax rate • the AMT does it by eliminating deductions. The recent change causing the individual income ranges to not be indexed to inflation will tell the rest of the tale: the majority of taxes (over 60%) are paid by wage-earners and that will rise. Then compare your taxes from year-to-year on the same stagnant wages.For example, the threshold for AMT was set at $250K per couple in 1969, that number wasn't adjusted for inflation until 2022. It becomes fairly apparent • comparing $250K in 1969 vs 2022 • how inflation (non-measured inflation) is the basis for income inequality.
Why is the alternative minimum tax form of 6251 so onerous to fill out?
To make things simpler, ironically.The purpose of the AMT is to ensure that the uber rich pay at least a minimum amount of taxes, but has since morphed into something that hits the upper middle classes*. It does that by having fewer tax brackets, fewer allowed deductions and a higher standard deduction. What you owe is whatever causes you to pay more taxes.However, this needs to be done in addition to the traditional tax calculation. So you need to take your calculations of your various income measures, and put back in various deductions that are disallowed under AMT rules. Or have to be recalculated. It’s a pain.Either someone decided that this was easier than having a completely separate tax form to calculate your AMt tax or someone lobbied to have mor complicated taxes so you’d go to one of the tax places or download tax software.*With the Trump tax changes, AMT affects fewer people.
What are some example tax strategies with illiquid incentive stock options to avoid getting bankrupt by alternative minimum tax?
Hold the options without exercising until liquid and net exercise. You won’t take any risks but you have to pay a high ordinary income tax rate and you have to stay employed at the same company until the very end.Exercise when the FMV is still the same as your strike price and there won’t be any AMT. If this is via an early exercise privilege prior to vesting, be sure to file an 83(b) election.Calculate the threshold before which you are not subject to AMT. Exercise only that the number of shares each year that keeps you below AMT.If you sell the shares the same tax year as your exercise, that would be a disqualifying disposition and you won’t have to pay any AMT. You will pay ordinary income tax on your actual gains instead.If you exercise NSOs first, you raise your AMT threshold. Then do number 3.This doesn’t reduce AMT but rather the taxes down the road. Use a PENSCO Trust Company | Pensco Trust Company account to purchase and hold your shares in an IRA account.For more details, go to this page and drill down on the links: How to Avoid Taxes on Stock Options | ESO Fund
How do you calculate alternative minimum tax?
As default what ever your cost, multiplied it by 10%.In other countries the default value is 14% until 24% but there is depend on what type of tax we talking about. Is it income tax? or..
How should the Alternative Minimum Tax be reformed?
Abolish it. Either the regular tax system is appropriate, and AMT isn't needed, or it's inappropriate, and needs to be reformed.Most people do their planning using regular tax rules. When they get hit by AMT, it's a "gotcha" tax. Not reasonable or fair. It's stupidly complex, for a number of reasons, but most particularly this: Some of the AMT is real. Some is just a timing difference - it can be carried forward and used to apply against future years' tax. The only good thing about AMT is that it makes more work for tax accountants like me ,)As for making it just apply to the "really" rich? Dumb. The rich deserve the same rules as you and I. In fact, that's one of the anti-1% arguments - that the rich get special treatment. They don't deserve special treatment, neither preferential, nor prejudicial.AMT just adds needless complexity.
How do I fill out a 1120 tax report?
If you are not sophisticated with taxes, DON'T try this form. You can get yourself in a lot of trouble.  Get a good CPA or EA.  The time and effort it will take you to figure this thing out is not worth it. If you value your time at more than the minimum wage, you will save time and money by hiring a professional.
Why don't schools teach children about taxes and bills and things that they will definitely need to know as adults to get by in life?
Departments of education and school districts always have to make decisions about what to include in their curriculum.  There are a lot of life skills that people need that aren't taught in school.  The question is should those skills be taught in schools?I teach high school, so I'll talk about that.  The typical high school curriculum is supposed to give students a broad-based education that prepares them to be citizens in a democracy and to be able to think critically.  For a democracy to work, we need educated, discerning citizens with the ability to make good decisions based on evidence and objective thought.  In theory, people who are well informed about history, culture, science, mathematics, etc., and are capable of critical, unbiased thinking, will have the tools to participate in a democracy and make good decisions for themselves and for society at large.  In addition to that, they should be learning how to be learners, how to do effective, basic research, and collaborate with other people.  If that happens, figuring out how to do procedural tasks in real life should not prmuch of a challenge.  We can't possibly teach every necessary life skill people need, but we can help students become better at knowing how to acquire the skills they need.  Should we teach them how to change a tire when they can easily consult a book or search the internet to find step by step instructions for that?  Should we teach them how to balance a check book or teach them how to think mathematically and make sense of problems so that the simple task of balancing a check book (which requires simple arithmetic and the ability to enter numbers and words in columns and rows in obvious ways) is easy for them to figure out.  If we teach them to be good at critical thinking and have some problem solving skills they will be able to apply those overarching skills to all sorts of every day tasks that shouldn't be difficult for someone with decent cognitive ability  to figure out.  It's analogous to asking why a culinary school didn't teach its students the steps and ingredients to a specific recipe.  The school taught them about more general food preparation and food science skills so that they can figure out how to make a lot of specific recipes without much trouble.  They're also able to create their own recipes.So, do we want citizens with very specific skill sets that they need to get through day to day life or do we want citizens with critical thinking, problem solving, and other overarching cognitive skills that will allow them to easily acquire ANY simple, procedural skill they may come to need at any point in their lives?
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